This Omnigence RIA briefing examines the historical behavior of the equity risk premium (ERP) and its role in evaluating equity market valuations. Using Damodaran’s implied ERP framework from 1961 through 2026, the report analyzes how investor risk appetite, bond yields, and market valuations have changed across different economic cycles.
The paper reviews major historical periods including the 1970s stagflation era, the 1999 technology bubble, the Global Financial Crisis, and the post-2022 rate shock environment. It highlights how ERP levels can help advisors assess whether equities appear relatively attractive or expensive compared to risk-free assets.
The report also examines how higher bond yields have narrowed the return advantage of equities compared to the post-GFC period, when near-zero interest rates supported elevated equity valuations.
For advisors and allocators, the briefing positions ERP as a long-term valuation framework rather than a short-term market timing signal.